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I own a small business and was approached by a fellow business (same type of work) looking to outsource some of their work. Can you offer advice?

The business would like to outsource some of their work to me. What are some things to keep my business protected? What should the contract say? All responses are greatly appreciated.

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7

Hi Amy - I think the obvious clauses would be the protection of "ownership of the client". Make sure you know what happens if one of their clients comes to you and wants to work with you directly. Also, protect yourself with clauses about how you get paid. The margins on subcontracted work are usually smaller than direct client billing and they get worse if the outsourcer isn't fair about paying on time. Good luck.

Thanks Richard!

6

Amy,
Another thing to consider is commitment of projected workload, especially if you will need to staff up. In other words you don't want to be short-staffed nor over-staffed. Ideally, they would pay for the forecast regardless of whether the work actually materializes. Otherwise, you would assume the risk.
Also, don't overlook service level considerations in the contract. In other words, what is their expectation of you in quantitative terms.
Lastly, there should be a clear definition of roles/responsibilities with respect to "customer service" , which can be a significant consumer of resources.
Good Luck!
Doug

Thanks Doug!

5

Hi Amy,

My small design agency works with other (usually larger) agencies in this manner. They will essentially outsource work to us, while they retain the client as their own. We're flexible enough that we have different arrangements with different agencies. Some agencies are completely transparent and their clients know that another agency is doing the design work. With others, we are considered part of their company if we need to interact with the client.

So for your legal billing business, the first thing you need to decide is what type of arrangements you're willing to do. Next, I would modify your existing agreement (you should have an agreement that covers all the standard legal jargon and clauses that you give to your own clients) to work for the particular business that you'll be doing business with. Essentially, this business is just another client for you, with some potential special circumstances. For instance, you may need to add a confidentiality clause. You will most likely be acting as an independent contractor for the other business as well. Make sure to specify the terms of payment too.

Hope that helps,
Sherry

4

You should work with an attorney to create a contract between the fellow business and yourself.

You will want to make the terms of your work, the payment and the ownership of the work clear, as well as limiting your liability.

Spending a little money on an attorney now could save you big bucks when things go wrong - as they often do.

Thank you Andrew for your comment. My business is in the Legal field, so getting help from an attorney is no problem. It is always nice to hear all the details from many sources as some things could be left out. I have my own contract in which I provide to my clients, which includes a confidentiality agreement, among other things associated with "Independent Contractor status". There are many factors that the other comments have suggested that should be included. I would never want to take a client of theirs without being protected. Thank you for your input.

3

Congratulations!

Confidentiality, Invoicing, Liability waiver and limitations, terms and termination, IP rights, taxes, just to name a few! Good answers so far too.

3

Make sure of expectations and decide if TRUST is established well enough to go ahead....

3

It all depends how much you can take the load as sub-contract. The essential of any business is to hold the Market and technical excellence to sustain that market.

0

We do this quite a bit, supporting other companies who could be seen as competitors and vice versa.

For us we look at whether we are targeting the same segment of the market as they are. If we are then, it probably doesn't make as much sense. But in situations where we are targeting a different section of the market, then the competition is less.

Either way, we always include a non-solicitation clause in our agreements with them, more for them, than us, so they know we won't go after their customers on our own.

It's been a good source of cash flow and education on the industry setting up these types of partnerships. We have three currently and they are working out well.

RC

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0

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0

There is no harm in outsourcing some work. However, the company you are opting to shall be authentic and experienced. And if it all happened under law's surveillance then there will be no such possibilities for any kind of cheating or other issues.

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